Smart Ways to Manage Inventory on a Budget
Tight on cash but need to stay stocked? This guide shares practical, low-cost strategies to help you manage inventory efficiently- perfect for early-stage founders and small business owners.
If you’re running a D2C brand with limited cash, managing inventory can feel like juggling flaming torches- exciting but risky! Stock too much, and your money’s tied up in products that just sit there, eating away at your working capital. Stock too little, and you risk disappointing customers, losing sales, and damaging your brand reputation.
According to a Netstock report 2024, 38% of small and medium businesses have extra stock they don’t need. Worrying about running out makes them buy more than necessary, which eats up their money. Bigger businesses with 500+ employees have even more stock, 44% of their inventory.
But here’s the good news: you don’t need a huge war chest to get inventory management right. In this article, we’ll look at simple and practical ways for D2C brands to manage their inventory better, especially when working with a tight budget.
1. Understand Your Inventory
Before you can fix or optimise anything, get a clear, objective picture of your current inventory. This step helps you identify what's working, what’s not, and where your cash is trapped.
Conduct a mini inventory audit
List all SKUs you currently stock.
Note down quantities, cost per unit, and total value held.
Identify slow-moving items that have been in stock for 60+ days.
Highlight fast-selling items that require frequent restocking.
Once you've audited your inventory, the next step is to apply the ABC analysis, a method for categorising items based on their importance and value.
A items: High value, low quantity- monitor closely.
B items: Mid-value, mid-quantity- manage efficiently.
C items: Low value, high quantity- automate or batch manage.
2. Reduce Inventory Holding
Holding too much inventory is a hidden killer. It eats into your cash and storage space and increases the risk of unsold stock.
Embrace Just-in-Time (JIT) Inventory
Order only when needed, based on real demand.
Order in smaller, more frequent batches:
Ideal for products with short lead times and predictable sales.
Set Reorder Points (ROP)
Determine the minimum stock level before replenishment is needed.
Formula:
Reorder Point = Average Daily Sales × Lead Time (in days)
Cut Inventory Fat
Eliminate underperforming SKUs: If it hasn’t sold in 90+ days.
Focus on top-selling, high-margin items.
Combine slow-moving items with fast sellers in discount packs.
3. Strengthen Supplier Relationships
Suppliers can make or break your cash flow. Negotiating favourable terms helps you conserve capital without compromising stock availability.
Ask for credit terms (e.g., Net-30 or Net-60).
Negotiate partial payments upfront and the rest after delivery or sale.
Explore consignment models- pay only after an item is sold.
Work with smaller, local suppliers- they’re often more flexible than large distributors.
4. Use Data to Forecast Trends
Your sales data holds clues about what your customers want. By tracking trends over time, you can predict which products will be in demand and when.
Analyse historical sales trends: Look at weekly, monthly, and seasonal performance.
Factor in lead times from suppliers and shipping delays.
Adjust for promotions, festivals, or peak seasons.
5. Use Inventory Tech That Fits Your Budget
Inventory software doesn’t have to be expensive. Even small businesses can access powerful tools for free or at a low cost.
Top Tools for Inventory Management
**Price as per website details.
One simple suggestion: If you're just starting out and feel it's too soon to invest in fancy inventory tools, don’t worry- Google Sheets can work wonders. It’s a free, easy-to-use tool that lets you gather all your information in one central place, whether it’s sales numbers, inventory details, or customer feedback.
6. Understand Product Category Nuances
Different types of products present their own unique inventory challenges. Consider these nuances and adjust how you manage each product. This will help you avoid wasting cash on slow-moving items and reduce the chances of running out of popular products.
7. Track Returns & Reverse Logistics
Returns are a significant factor in D2C inventory management.
Factor expected returns into your inventory forecasting.
Establish clear processes for inspecting, refurbishing, or liquidating returned stock.
Consider setting aside a portion of working capital for reverse logistics handling.
8. Explore Inventory Financing
If your product has proven demand but you lack funds to restock, financing can help bridge the gap, but only if used wisely.
Trade Credit: Negotiate payment due after 30–60 days with your suppliers.
Invoice Financing: Get advances on unpaid customer invoices.
Working Capital Loans: Look for government-backed MSME loans or low-interest business loans.
Revenue-Based Financing: Pay back from future sales or from platforms like Velocity, GetVantage, Recur Club, etc.
Inventory Management Strategies for Different Stages
Inventory management isn’t one-size-fits-all. As your business grows and changes, the way you handle inventory needs to evolve, too. What works when you’re just starting out might not be enough once your sales pick up or your product range expands
Here’s how to adapt your strategy at each stage:
In the early days, you can also experiment with white-labeling certain products to test the market before investing in full-scale production. This lets you launch faster, minimise upfront costs, and validate demand without building everything from scratch.
If a white-labeled product gains traction, you can gradually transition to your own custom version with more control over quality, branding, and margins.
Your Monthly Inventory Checklist
Set aside a fixed time every week or month for this. It’s worth it!
Final Thoughts
At the end of the day, cash flow and inventory management go hand in hand because the money you use to buy and store products is money you can’t spend elsewhere. If you have too much stock sitting around, your cash is stuck there, which means less money for things like marketing, paying bills, or launching new products. But if you don’t have enough stock, you might miss out on sales and upset customers. The trick is to find the right balance.
Because when inventory works for you, not against you, growth becomes a whole lot easier.
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